Story No. 3

Economic Espionage Case to Go to Trial

By RACHEL KONRADAP Business Writer

November 10, 2003

SAN JOSE, Calif. -- An economic espionage case that could have profound implications for technology companies from Silicon Valley to Shanghai will go forward with a jury trial starting in June, according to a federal judge's order.

San Jose-area businessmen Fei Ye and Ming Zhong were arrested in November 2001 at San Francisco International Airport with suitcases allegedly crammed with trade secrets and at least $10,000 in equipment stolen from U.S. tech companies. Prosecutors said the men -- both originally from China -- stole microchip blueprints and computer aided design scripts from Sun Microsystems Inc., NEC Electronics Corp., Transmeta Corp. and Trident Microsystems Inc., and they planned to start a microprocessor company with the Chinese government.

Defendants' attorneys argued in San Jose's federal court last month that the case should be dismissed because the 10 counts of criminal indictment were vague, and the Economic Espionage Act of 1996 was unconstitutional. They said their clients' suitcases contained routine reference materials any engineer might carry -- and that if the men possessed trade secrets, they didn't know it.

But U.S. District Judge James Ware rejected the motions to dismiss in a Nov. 3 order. Ware noted that federal prosecutors had turned in an "extraordinary depth and breadth" of evidence, including more than 8,800 pages of documents related to the alleged trade secrets.

"Defendants have more than enough information to prepare for trial, to avoid surprise at trial, and to plead double jeopardy in the event of a second prosecution," Ware wrote. He told attorneys on both sides to reserve every working afternoon in June and July for a jury trial.

The lawsuit could signal a crackdown on what is believed to be rampant trade secret theft in Silicon Valley. A PricewaterhouseCoopers study determined that trade secret theft costs the nation's 1,000 largest companies more than $45 billion per year, but few executives know when data has been stolen -- and even fewer are willing to admit it.

If convicted, Ye and Zhong could face up to 95 years in prison and $3 million in fines on 10 criminal counts.